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CONSUMER TRIBUNAL RULING

Shoprite first big retailer to run foul of reckless-lending laws

The national consumer tribunal fines Shoprite R1m and orders it to appoint a debt counsellor at its own cost

07 September 2017 - 05:49
Ann Crotty

Shoprite storefront. Picture: MICHAEL ETTERSHANK

The Shoprite Group is the first large retailer to be found guilty of reckless lending by the national consumer tribunal.

The national credit regulator announced on Wednesday that the tribunal had fined Shoprite R1m for entering into credit agreements with consumers without conducting a reasonable and objective assessment of the consumers’ ability to afford the loans.

The tribunal has ordered Shoprite to appoint a debt counsellor at its own cost. The counsellor is tasked with assessing if the consumers that were mentioned in the national credit regulator’s referral are over-indebted. The tribunal’s ruling followed an investigation by the national credit regulator into lending activity by Shoprite in 2013 and 2014.

"Some of the conduct of Shoprite that was found to be in contravention of the National Credit Act was that Shoprite, when assessing whether a consumer could afford a loan or not, took into account unverified income of another person, such as a spouse or a life partner," said Nomsa Motshegare CEO at the national credit regulator.

Shoprite said the finding related to one of its subsidiaries, which had extended credit "too easily" to some of its customers so that they could buy goods from OK Furniture stores.

"The matter relates to credit agreements concluded in June 2013 and June 2014 with nine consumers from amongst thousands," said Shoprite in a statement. It said that all of the credit extended had been settled in full by the customers concerned.

"The National Credit Act is a complex piece of legislation, as acknowledged by the tribunal. Our credit-granting offices adhere to strict measures and are satisfied that the current process serves the best interests of its customers and is in compliance with legislation," said Shoprite.

The national credit regulator has referred several of the large retailers including Edcon, Foschini, Mr Price and Lewis, to the tribunal for contravention of the National Credit Act, but those contraventions were related to charging club fees on credit agreements. Shoprite is the first of the large retailers to be charged and found guilty of reckless lending.

Amendments to the National Credit Act, introduced in 2014, require anyone selling goods on credit or providing loans to conduct a detailed financial assessment of the client. If it is not done any credit agreement entered into is classified as reckless.